Black Coffee: Two Minutes to Midnight

Welcome to another rousing edition of Black Coffee, your off-beat weekly round-up of what’s been going on in the world of money and personal finance.

I hope everyone is enjoying the holidays! Let’s get right to it, shall we?

“Money is gold, nothing else.”

— JP Morgan

“You make most of your money in a bear market; you just don’t realize it at the time.”

— Shelby Cullom Davis

“An optimist stays up until midnight to see the new year in. A pessimist stays up to make sure the old year leaves.”

— Bill Vaughan

Credits and Debits

Debit: I see Forbes has published its annual list of America’s wealthiest celebrities, and Star Wars creator George Lucas tops the list with a net worth of $5.4 billion, thanks to the 2012 sale of his Lucasfilm production company to Disney for $4.1 billion. Sadly, the list also unintentionally highlights the growing disparity between the richest and poorest Americans. You can thank the Fed for that.

Credit: The newest member of that list is 21 year-old Kylie Jenner, whose $900 million net worth has her on course to become the youngest billionaire ever. According to Forbes, Kylie Cosmetics found success by targeting her 168 million-plus social media followers. I’m not sure which is more shocking: Kylie’s $900 million net worth, or the fact that she has 168 million followers. No; I’m not bitter. Okay … maybe just a little.

Credit: For what it’s worth, the 500 richest people in the world had a combined $4.7 trillion in wealth as of last Friday’s stock market close, some $511 billion less than they had at the beginning of the year. I know what you’re thinking: How will those unfortunate people ever survive? I’m sure they’ll manage. Somehow.

Credit: Speaking of the stock market, the second longest bull market for stocks has finally come to an end — even if it was an artificial one from the get-go, thanks to a decade of central bank “money” printing. Now we’ll see just how bad it will get; the stock market bear is just getting started, so it could be a long way down from here.

Debit: The good news is, for the week, the S&P 500 managed to climb 2.9%, while the Dow rose 2.8% and the Nasdaq rallied 4%. Those were the first weekly gains for all three indices since the end of November. Even so, all three indices are still smarting from eye-watering losses for the month of December, with the S&P down 9.9%, the Dow off 9.7% and the Nasdaq down 10.2%. Somebody pass me a tissue. This guy too:

Credit: Despite the positive week for stocks, the big fear is that this week’s gains were nothing but a wicked bear trap. That’s because massive, one-day rallies are typically more characteristic of bear markets. Indeed, 11 of the 17 one-day percentage gains of 5% or more for the S&P 500 since 1970 occurred in the midst of the 2000-03 and 2007-09 market downturns. Uh oh.

Debit: The usual protection strategy employed by investors in bear markets for stocks is to increase their bond holdings. Unfortunately, early signs suggest a Plan B may be in order this time around because the traditional correlation between stocks and bonds has broken. Yes, I’ve warned several times here that such a correlation breakdown would be a potential sign of impending financial system failure.

Debit: Total worldwide debt is now 320% of global GDP, which is 40% more than a decade ago. As a result, the world is running out of options. But as banker Satyajit Das warns, the debt will have to be paid, “one way or another.” Deleveraging and devaluations have been impractical and unworkable, respectively — which is why Das says that a de facto default in the form of a monetary reset will be the ultimate solution.

Credit: The truth is, the US dollar ceased being money after Nixon decoupled it from gold in 1971. Since then, the greenback has been a fiat currency that continues to maintain some semblance of value only because of the public’s blind faith in the state and its credit. At some point the math is going to catch up with reality, and that faith is going to be severely tested. Could it be as early as next year? Only time will tell.

By the Numbers

Here’s a by-the-numbers look at the New Year’s holiday:

2 The number of years the Times Square ball drop failed to occur. (1942 and 1943 due to World War II light restrictions.)

3 The percentage of Americans who don’t plan to celebrate the new year.

12 The diameter, in feet, of the Times Square ball.

17 The percentage of emergency-room visits that are drug- or alcohol-related on New Year’s Eve; that’s the most of any holiday.

$17.88 This year’s average hourly rate for a babysitter on New Year’s Eve — that’s 20% higher than the rest of the year.

22 The percentage of Americans who admit to falling asleep before midnight.

24 The percentage of Americans who spend the night at home.

45 The percentage of Americans who make a New Year’s resolution. (3 in 4 will break their resolution in the first week.)

$189 The price of a Times Square Ball Drop party pass.

291 The number of sanitation workers required to clean up after the Times Square party.

Do you expect the economy to be better or worse in 2019 than it was in 2018?

Worse (59%)

About the same. (30%)

Better (11%)

More than 1300 Len Penzo dot Com readers responded to this week’s poll and it turns out that almost 3 in 5 readers expect the economy to take a turn for the worse in 2019. Only 1 in 9 believe an improvement from the status quo is in the cards. I think 2019 will be a year of big changes for most Americans — and the beginning of the end for the “Almighty Dollar.” At least as we know it today.

Programming Note

In case you missed it, RD Blakeslee’s complete “Grandfather Says” archive can now be accessed via the menu at the top of my blog. I urge you to check them out when you get some free time. It’s quite a collection!

Useless News: Sugar Daddy

A 55 year old multi-millionaire was getting married to an unbelievably gorgeous woman who was just 22. So he decided to throw a grand wedding reception on the couple’s big day.

Of course, some of his friends were quite jealous of the millionaire’s 22 year old bride. So in a quiet moment, one of them took the millionaire aside and asked how an older guy like him ever managed to land such a beautiful young woman.

Every week I feature the most interesting question or comment — assuming I get one, that is. And folks who are lucky enough to have the only question in the mailbag get their letter highlighted here whether it’s interesting or not! You can reach out to me at: Len@LenPenzo.com

Comments

Im not sure which is more shocking: Kylies $900 million net worth, or the fact that she has 168 million followers. No; Im not bitter. Okay maybe just a little. – Len

… this stock market downturn will be highly volatile with many big ups and downs, and with an overall down-trend that is likely to last for years.

Under tremendous pressure, the Fed sticks to its guns, mostly, and the crybabies are having a cow.
– Wolf Richter

After the great depression of 1929 through 1941, The United States entered an era that saw its citizens unified in the effort to win WWII. After that, the country emerged, idealistic, as the Leader of the Free World and enjoyed the height of its culture in the third quarter of the twentieth century.

If Wolf is right (and I think he is), I wont live to see it but Len will: It may be that the values expressed in this blog will see a renaissance similar to that of 1945 – 1970.

So far this morning, 71% of the readers here who answered the weekly poll would choose to time-travel to the past, not the future.

P.S. Len, Thanks for the heads up re Grandfather Says now on the heading menu.

A return to a monetary system that doesn’t depend on fiat currency will ensure a return to those values, Dave. In fact, I am convinced that the moral decay that currently plagues every facet of society is a direct result of the phony money we use to conduct our transactions.

Disagree, Greg. There are other potential places to diversify and hide; I touch on them almost every week here (physical precious metals). It’s just that, after 50 years of constant bashing, the mainstream media and financial industry have done such a good job of marginalizing gold and silver that most people refuse to seriously consider those options, or completely overlook them.

Disclaimer

This site is for informational and entertainment purposes only, and the content herein should not be mistaken for professional financial advice. This website accepts advertising in the form of monetary and other compensation; as such, topics of discussion are occasionally influenced by these advertisers. Ultimately, you and you alone are responsible for the decisions you make in life, so please contact an independent financial professional for advice regarding your unique personal situation.